On-Line Quiz

Note: There are 10 multiple choice questions below. Answer each question by clicking the
appropriate button. When you have answered all of the questions, click the "Check Answers" button
at the bottom of the page. Your score will be calculated, and you will see a list of the questions
that you answered correctly, and those that you answered incorrectly. You may retake the quiz as
often as you wish. Click the "Reset" button to clear all your answers before you retake the quiz.

If domestic spending exceeds output, we ______ the difference--net exports are ______.

import; negative
export; positive
import; positive
export; negative

If net capital outflow is positive, then:

a decrease in industrial production.
exports must be negative.
the trade balance must be positive.
the trade balance must be negative.

In a small, open economy if net exports are negative, then:

domestic spending is greater than output.
saving is greater than investment.
net capital outflows are positive.
imports are less than exports.

In a small open economy, if the world real interest rate is above the rate at which national saving equals
domestic investment, then there will be a trade ______ and ______ net capital outflow.

In a small open economy, starting from a position of balanced trade, if the government increases
domestic government purchases, this produces a tendency toward a trade ______ and ______ net capital outflow.

Holding other factors constant, legislation to cut taxes in an open economy will:

increase national saving and lead to a trade surplus.
increase national saving and lead to a trade deficit.
reduce national saving and lead to a trade surplus.
reduce national saving and lead to a trade deficit.

If the government of a small open economy wishes to reduce a trade deficit, which policy action
will be successful in achieving this goal?

As the U.S. budget deficit shrank in the 1990s, the increase in U.S. national saving was ______ than the
expansionary shift in the U.S. investment function, resulting in a trade ______.

stronger; deficit
stronger; surplus
weaker; deficit
weaker; surplus

The real exchange rate:

measures how many Japanese yen one really gets for a U.S. dollar.
is equal to the nominal exchange rate multiplied by the domestic
price level divided by the foreign price level.
is equal to the nominal exchange rate multiplied by the foreign
price level divided by the domestic price level.
is the price of a domestic car divided by the price of a foreign car.

If the real exchange rate is high, foreign goods:

and domestic goods are both relatively expensive.
and domestic goods are both relatively cheap.
are relatively expensive and domestic goods are relatively cheap.
are relatively cheap and domestic goods are relatively expensive.